The government has some time ago rolled out two big economic reform initiatives in the form of the Goods and Services Tax (GST) and the Real Estate Regulatory Authority (RERA). These rules have a huge effect on real estate and by extension, home loans. Most people use the home loan route to buy homes. Let us understand the effects of GST and RERA on mortgages.
The GST is a single-tax system. In effect, it replaces levies like service tax, VAT, central excise duty etc. This unitary tax compliance system has simplified the home buying process. Plus, the passage of Input Tax Credit (ITC) has virtually ensured that there may not be a significant additional burden to buying a home for most of you. Homebuyers in the affordable housing segment are beneficiaries.
Specifically, homes of up to 60 square meters carpet area in size - have benefitted significantly from the reduction of GST by 4 percentage points as the rate has been slashed from 12% to 8%. Also, the reduction in home loan interest rates has led to lower home loan costs and cheaper EMIs. If you are planning to get benefits by buying affordable homes, do use a home loan eligibility check to know the details. You may also need to find out whether you are eligible for affordable home benefits.
Thankfully, ready-to-move (RTM) properties that have completion certificates have been kept out of the GST ambit. Naturally, these units attract no tax from home buyers. So, buyers using home loans have no burden on this front
Unfortunately, the GST is also pinching the pockets of many home loan borrowers. This is because under-construction (UC) properties attract 12% GST with full input tax credit (ITC). This has caused homebuyers to try and stay from the under-construction option. However, real estate developers are starting to give big discounts to attract buyers. Use a home loan calculator to calculate the total repayment amount and the EMI.
The RERA legislation is a dream come true for all home buyers. Under the Act, all the developers and real estate agents would have to get themselves registered. This is because the rules would be applicable to all real estate projects that have building permissions approved by urban development authorities, municipal corporations, and other local bodies. While banks and financial lenders did their due diligence before giving home loans to borrowers, many fly by night operators midway left projects or misused funds.
This is where RERA is a huge advantage, especially for borrowers taking home loans. RERA’s main aim is to ensure accountability towards home allottees and protect their interest. It does this as a regulator by infusing transparency, and ensuring fair play. As a direct fall-out, such actions reduce frauds and delays. For far too long, home loan borrowers took home loans without getting any solid guarantee to get the home on time and as promised. With RERA, a regulatory mechanism is there to enforce contracts and to establish fast-track dispute resolution mechanism.
In states where RERA has been implemented, borrowers are now able to track the progress of the project on an almost real-time basis. They now know that if they take benefit of multi-year low home loan interest rates to get their dream home, such an important investment is covered against all types of man-made risks.
At an overall level, both GST and RERA have streamlined the business of making and selling homes. With real estate rates stagnant and the rate of interest on home loans priced attractively, this is a good time to go for a home loan eligibility check so that you can purchase your prized home. Use a home loan calculator to know the EMI and assess your repayment capacity.